The arbitration clause is the contractual decision that determines whether a future dispute will be resolved in ordinary courts or by arbitrators chosen by the parties themselves — and this choice has a direct impact on the timeline, cost, and confidentiality of the process.
1. Two identical disputes, two different outcomes
Two joint venture agreements, with nearly identical financial clauses, gave rise to similar disputes: disagreement over how to calculate each partner’s share of the results for a given fiscal year.
The first contract had no arbitration clause. The dispute went to state court. The case took four years to move through the first instance. During that time, the pleadings, expert reports, and financial documents of the companies involved became public — accessible to anyone consulting the court’s system. The wear and tear between the partners over the long proceedings made any attempt to preserve the joint venture unfeasible.
The second contract provided that any dispute would be resolved by arbitration, under the rules of a São Paulo arbitration chamber. The proceeding was initiated, arbitrators were chosen by the parties, an evidentiary hearing was held, and the arbitral award was issued within 14 months. The entire process remained confidential. After the award, the parties negotiated the dissolution of the joint venture on terms both considered reasonable — without the public wear and tear of a lengthy court case.
These two cases don’t prove that arbitration is always better. They prove that the choice between arbitration and litigation is a decision that needs to be made before the dispute arises — and that, when it isn’t made, the default is ordinary courts, with all their timelines and their public nature.
2. What arbitration is and its legal basis
Arbitration is a private method of dispute resolution in which the parties, by mutual agreement, submit their dispute to an arbitrator or panel of arbitrators — instead of to the Judiciary. The arbitral award carries the same enforceability as a court judgment, under Article 31 of Law 9,307/1996 (the Brazilian Arbitration Act).
Law 9,307/1996 was significantly amended by Law 13,129/2015 (the Arbitration Act reform), which, among other changes:
- Confirmed the possibility of arbitration involving public administration (administrative contracts);
- Regulated interim relief in arbitration and its relationship with judicial injunctive measures;
- Clarified the cases for a “carta arbitral” (“arbitral letter” — the instrument used for communication between the arbitrator and the Judiciary for the enforcement of certain acts).
For arbitration to be valid, two requirements must be met:
- Arbitrability of the subject matter: Only disputes involving direitos patrimoniais disponíveis (“disposable property rights” — i.e., rights the parties have the power to freely dispose of) may be submitted to arbitration. Individual labor disputes, consumer relations, and non-disposable rights (such as alimony/child support) are, as a rule, outside the scope of arbitration. Business contracts between parties in an equivalent bargaining position are generally fully arbitrable.
- Valid agreement between the parties: Submission to arbitration must be express — through a cláusula compromissória (“arbitration clause,” inserted in the original contract) or a compromisso arbitral (“arbitration agreement,” entered into after the dispute has arisen).
3. The arbitration clause (cláusula compromissória): what it must contain to be effective
The cláusula compromissória is the contractual provision that establishes, before any dispute arises, that disputes stemming from that contract will be resolved through arbitration. Article 4 of Law 9,307/1996 provides that it must be in writing — it may appear in the body of the contract itself or in a separate document that expressly refers to it.
An effective arbitration clause must define, at a minimum:
- Institutional arbitration chamber or ad hoc arbitration. If the parties opt for an institutional chamber (CAMARB, CAM-CCBC, FGV-CAM, ICC, among others), the clause must name it in full. If they prefer ad hoc arbitration (no chamber, with arbitrators appointed directly), the clause needs to be more detailed — establishing how arbitrators will be chosen, which subsidiary rules apply, and who resolves deadlocks in the appointment.
- Seat of arbitration. This defines which procedural law applies and which court has jurisdiction over ancillary matters (interim relief, enforcement of the award).
- Language of the proceedings. Especially relevant in joint ventures with foreign partners.
- Number of arbitrators. A sole arbitrator (faster, cheaper decision) or a three-arbitrator panel (more suitable for complex disputes above a certain value).
- Applicable substantive law. In international or cross-sector contracts, it may be necessary to specify whether the arbitrator will apply Brazilian law, foreign law, or general principles of law.
Pathological clauses. “Pathological” clauses are arbitration clauses containing defects that hinder or make the arbitration proceeding unworkable — for example, naming an arbitration chamber that doesn’t exist, setting impossible conditions for choosing arbitrators, or ambiguously combining arbitration and litigation. Pathological clauses generate years of litigation before the merits of the dispute are even addressed.
4. When arbitration makes sense (and when it doesn’t)
Arbitration is not the ideal solution for every type of business dispute. The decision on whether to include the arbitration clause should consider:
When arbitration tends to make sense:
- Contracts of significant value (above R$ 500,000 to R$ 1 million, as a practical benchmark — the cost of arbitration needs to be proportional to the amount in dispute);
- Disputes involving sensitive business information (figures, margins, strategy) that the parties don’t want made public;
- Technical disputes that benefit from arbitrators with specialized knowledge (technology contracts, intellectual property, construction, valuation of equity stakes);
- Relationships between parties with equivalent economic standing, where power imbalance isn’t a relevant factor;
- Contracts with foreign parties, where international arbitration offers neutrality and makes it easier to enforce the award in other countries (via the New York Convention, incorporated into Brazilian law by Decree 4,311/2002).
When arbitration may not be the best choice:
- Low-value disputes, where the cost of arbitration (arbitrators’ fees, chamber fees, and legal fees) is disproportionate to the amount at stake;
- Situations where the weaker party has an interest in the proceedings being public (e.g., whistleblowing on unlawful practices);
- Contracts where one of the parties lacks the resources to fund arbitration — which can create a real imbalance in access to dispute resolution;
- Matters the law considers non-arbitrable (non-disposable rights, public policy issues, certain consumer disputes).
5. How to choose the arbitration chamber: practical criteria
In Brazil, there are dozens of active arbitration chambers. For business contracts between small and mid-sized companies, the relevant criteria for choosing one are:
1. Cost of the proceeding. Each chamber has a cost schedule based on the value of the dispute — the chamber’s administrative fees plus the arbitrators’ fees. Before naming a chamber in the arbitration clause, it’s useful to simulate the cost of a hypothetical dispute at the contract’s value.
2. Rules and timelines. Chambers with modern rules tend to have more efficient proceedings. Check whether the chamber’s rules provide for expedited proceedings for disputes below a certain value.
3. List of arbitrators. The quality and specialization of the arbitrators available on the chamber’s roster is a determining factor for the quality of the decision. For corporate disputes, for example, it matters whether the chamber has arbitrators with training or experience in business law.
4. Seat and infrastructure. The chamber’s seat determines where hearings will be held (absent agreement between the parties). For contracts involving companies from different states, chambers based in São Paulo or Rio de Janeiro offer greater availability of dates and infrastructure.
5. Reputation and track record. Chambers with a higher volume of proceedings tend to have more tested rules and secretariats more experienced in managing timelines.
Chambers frequently named in Brazilian business contracts include: CAM-CCBC (the Brazil-Canada Arbitration and Mediation Center), CAMARB (the Brazilian Business Arbitration Chamber), FGV-CAM (the FGV Mediation and Arbitration Chamber), and the AMCHAM chamber, among others. This list is not exhaustive and does not constitute a recommendation.
6. The arbitration process: stages, timelines, and what to expect
The arbitration proceeding generally follows the rules of the chosen chamber. The typical stages are:
Stage 1 — Initiation (weeks 1 to 4)
The claimant files the request for arbitration with the chamber, indicating the value of the dispute, the arbitration clause being invoked, and a summary of the dispute. The chamber notifies the respondent, who has a deadline to submit an initial response.
Stage 2 — Constitution of the arbitral tribunal (weeks 4 to 12)
Each party appoints its arbitrator (in three-member panels) or the parties agree on a sole arbitrator. The panel’s chair is chosen by the two party-appointed arbitrators, or by the chamber in case of deadlock. Arbitrators declare their independence and impartiality; any challenges are decided by the chamber.
Stage 3 — Terms of reference and procedural calendar
The tribunal defines, in a document called the “Terms of Reference” or equivalent, the subject matter of the dispute, the issues to be decided, the applicable law, and the procedural calendar. This stage is crucial: a well-defined calendar significantly reduces the risk of delays.
Stage 4 — Written phase (months 3 to 8)
Exchange of briefs (full statement of claim and statement of defense), documents, expert reports, and any reply and rejoinder. Duration depends on complexity and volume of documents.
Stage 5 — Evidentiary hearing (months 8 to 12)
Examination of witnesses and experts, oral arguments, and any additional evidence-taking. In simple commercial disputes, this may be waived by agreement between the parties.
Stage 6 — Arbitral award
The tribunal deliberates and issues its decision — the arbitral award (laudo arbitral). Law 9,307/1996 provides that the arbitral award is final and binding, not subject to appeal on the merits (only to a ação anulatória — an action to set aside the award — in the limited circumstances set out in Article 32 of the same law). Enforcement of the award takes place before the Judiciary, following the procedure for enforcing a judicial title (Article 515, VII of the Code of Civil Procedure).
Typical timelines: arbitration proceedings at Brazilian chambers take between 12 and 24 months for disputes of average complexity. Expedited proceedings (for disputes below a certain value, per each chamber’s rules) can be concluded in 6 to 9 months.
FAQ
1. Does an arbitration clause included in a standard contract bind a party that claims not to have known what it meant?
In business-to-business (B2B) contracts, Brazilian case law tends to uphold the validity of the arbitration clause even when one party claims not to have understood its content — because legal entities and their representatives are presumed capable of reading and understanding the contracts they sign. Article 8 of Law 9,307/1996 establishes the autonomy of the arbitration clause in relation to the rest of the contract: it remains valid even if the main contract is void. The picture changes in consumer relationships: the Superior Court of Justice (STJ) has rulings that limit or set aside the arbitration clause in B2C adhesion contracts, especially when the consumer party did not initiate the proceeding. In contracts between small and mid-sized companies of equivalent standing, this argument rarely succeeds — but clear drafting of the clause, with the typographical emphasis required under Article 4, Paragraph 2 of Law 9,307/1996 for adhesion contracts, is the best protection against future challenges.
This is general information and does not replace consulting a lawyer for an analysis of your specific case.
2. Is it possible to obtain emergency relief (an injunction) in arbitration?
Yes. Law 13,129/2015 (the Arbitration Act reform) expressly regulated interim relief in arbitration. Before the arbitral tribunal is constituted, a party may request emergency relief from the Judiciary — and, once the tribunal is constituted, may request it directly from the arbitrators, who have the power to grant interim and anticipatory relief. The rules of modern chambers provide for emergency arbitrator mechanisms precisely for situations where urgency doesn’t allow waiting for the tribunal to be duly constituted. In practice, the Judiciary has cooperated with arbitral tribunals: measures granted by a judge before the tribunal’s constitution are communicated to the arbitrators, who may uphold, modify, or revoke them after reviewing the merits of the interim matter. The choice between requesting the measure from the Judiciary or from an emergency arbitrator depends on the actual urgency, the cost of the chamber’s emergency procedure, and the nature of the relief sought.
This is general information and does not replace consulting a lawyer for an analysis of your specific case.
3. How much does business arbitration cost in Brazil, and who pays for it?
The cost of arbitration at an institutional chamber has two main components: (a) the chamber’s administrative fees and (b) the arbitrators’ fees — generally calculated as a percentage of the amount in dispute, according to each chamber’s fee schedule. For a dispute worth R$ 1 million, the total cost of the proceeding (chamber plus arbitrators) usually ranges between R$ 80,000 and R$ 180,000, depending on the chamber and the complexity involved. For disputes above R$ 5 million, the percentage tends to decrease, but the absolute amounts remain significant. On top of this cost come each party’s legal fees, expert costs, and operational expenses (travel, translations). As a rule, each party advances its share of the costs at the start of the proceeding; at the end, the arbitral award determines who ultimately bears the costs — the most common default is that the losing party bears the costs of the proceeding, but the tribunal has discretion to allocate costs differently, especially in cases of partial victory. Chambers with expedited procedures tend to have separate, more accessible fee schedules for smaller disputes.
This is general information and does not replace consulting a lawyer for an analysis of your specific case.
Disclaimer
The information in this article is general and educational in nature. It does not constitute legal advice for any specific situation and does not replace an analysis by a lawyer of your particular case.
Are you considering including an arbitration clause in a contract, or do you need support with an ongoing arbitration proceeding? Tell us what’s going on.
Alessandra De Paula Souza — OAB/PR 31.133